MTD for limited companies: not yet (and what to do now)

Q: Can I keep using a spreadsheet for company bookkeeping?

Technically yes, but most limited companies above hobby scale benefit from cloud accounting for management reporting, payroll integration and audit-readiness. The MTD VAT requirement makes pure-spreadsheet workflows harder to keep compliant.

If you trade through a limited company, the MTD headlines from April 2026 do not affect you the way most articles suggest.

The new wave (sometimes called MTD ITSA, which stands for Making Tax Digital for Income Tax Self Assessment) is for individuals: sole traders and landlords. Limited companies pay corporation tax instead, which works differently. So if you only earn through your company, MTD ITSA is not your problem.

That does not mean MTD is irrelevant to your company. MTD for VAT has been mandatory for VAT-registered businesses, including limited companies, since April 2022. And MTD for Corporation Tax has been mooted by HMRC for years, though no implementation date is set.

This article covers where limited companies actually stand today: what is in scope, what is not, what is coming, and what director-shareholders should focus on right now.

Why limited companies are not in MTD ITSA

MTD ITSA applies to individuals filing Self Assessment returns showing income from self-employment, property, or both. The legal taxpayer is the person, not the business.

A limited company is a separate legal entity; the law treats it as if it were its own person. The company’s income is taxed under corporation tax, filed on a form called the CT600, not on a Self Assessment return. The director-shareholder may take salary and dividends from the company, both of which are reported on their personal Self Assessment return, but neither counts as self-employment or property income for MTD ITSA threshold purposes.

So a limited company with £500,000 of turnover, and a director taking £50,000 in dividends, is not in MTD ITSA. The director’s personal Self Assessment return is also not in MTD ITSA, because it shows employment income (the salary) and dividend income, neither of which is in scope.

The result: limited company structures sit outside the April 2026 MTD ITSA wave, the April 2027 wave, and the April 2028 wave. Limited companies are not currently within any announced MTD ITSA threshold. Our guide to the MTD threshold covers how the test works for individuals.

What is in scope for limited companies: VAT MTD

Most limited companies above £90,000 of turnover are VAT-registered, and MTD for VAT has been mandatory for them since April 2022.

If you are running a UK limited company that is VAT-registered, you should already be:

Keeping digital VAT records in HMRC-recognised software
Submitting VAT returns through the software, not the old HMRC online portal
Maintaining a digital link between your records and the submission

Most companies have settled into MTD VAT by now. The few we still meet that are not properly compliant tend to be those who incorporated within the past year or two, or those whose VAT registration came later than incorporation. If you have any doubt about your MTD VAT position, the time to sort it is before the next quarterly VAT return.

MTD for Corporation Tax: discussed, not scheduled

HMRC has consulted multiple times on extending MTD to corporation tax. The current position is that there is no published implementation date, and HMRC has indicated any rollout would follow a multi-year pilot.

In practice this means:

No need to act now on MTD for Corporation Tax specifically.
The likely shape, when it does arrive, is similar to MTD ITSA: digital records, regular submissions to HMRC, and replacement of the annual CT600 with a more granular cycle.
Software you choose for MTD VAT compliance now will almost certainly handle MTD for Corporation Tax when it lands, so the platform investment is durable.

We watch the consultations and will signal to clients well in advance of any implementation date being set.

Hybrid scenarios: a company plus personal property or self-employment

A reasonable number of clients run a limited company and hold property in their personal name, or and have a side trade. The two regimes are separate.

The limited company side of life:

Corporation tax through the CT600
VAT MTD if VAT-registered
Not in MTD ITSA in any form

The personal side:

A personal Self Assessment return as before, for salary, dividends and any other income
If gross income from personal self-employment plus personal property exceeds the MTD ITSA threshold, that side is in MTD ITSA

A director who takes £45,000 of salary plus £20,000 of dividends from their company, and who also has £55,000 of gross rents from personally-owned BTLs, is in MTD ITSA from April 2026 on the property side, even though the company side is unaffected.

The threshold for the personal side combines self-employment plus property only. Salary and dividends do not count.

So the question for a director-shareholder is not “am I in MTD because I run a company”. It is “do I personally have self-employment or property income above the threshold”. For most company directors the answer is no, and they are out of MTD ITSA. For a minority with substantial personal property income, the answer is yes, and the property side is in scope.

What director-shareholders should focus on right now

Three things matter in 2026 and 2027 if you run a limited company.

1. Confirm your MTD VAT compliance is actually clean. Most directors think MTD VAT is sorted because their VAT returns are filed through software. The deeper question is whether the records behind the return are MTD-compliant. Spreadsheet workflows that get re-keyed at quarter end are not. We see this in reviews more often than we would like.

2. Ignore MTD ITSA noise unless you personally have qualifying income. The April 2026 launch generated a lot of marketing from software vendors targeted broadly at “businesses”. Most of it does not apply to limited companies. If your only personal income is salary and dividends from the company, MTD ITSA does not affect you in any way.

3. Pick durable software for the next decade. The accounting software you pick for VAT MTD now will almost certainly be the same one that handles MTD for Corporation Tax when it lands. Picking well now saves a migration later. We run Sage at Arro Group and recommend it for most active limited companies, because it is the platform we support in-house every day. Xero and QuickBooks are credible alternatives, and we keep supporting clients who are already on them. When you come on board with us, we deal with the software: it sits inside your monthly fee, and the only thing we need from you is the bank feed, which we organise with you.

What about partnerships?

Partnerships sit between sole traders and limited companies. MTD for partnerships was deferred and no new implementation date has been published. Partnership returns continue under the existing Self Assessment regime for now. Individual partners with qualifying personal property or self-employment income outside the partnership may still be in MTD ITSA on that personal income.

Frequently asked questions

Are limited companies in MTD ITSA? No. MTD ITSA only applies to individuals reporting self-employment or property income on Self Assessment. Companies pay corporation tax through the CT600, which is not within MTD ITSA.

Does MTD VAT apply to my limited company? Yes, if your company is VAT-registered (turnover over £90,000 or voluntarily registered). MTD VAT has been mandatory since April 2022.

When will MTD apply to corporation tax? No implementation date is set. HMRC has indicated multi-year piloting before any rollout.

I am a director with personal property income. Does MTD ITSA apply? Yes, if your gross combined personal self-employment plus property income exceeds the threshold (£50k from April 2026, £30k from April 2027, £20k from April 2028). The company side is separate; the personal side follows the standard MTD ITSA rules.

Should I move my sole trade to a limited company to avoid MTD? MTD compliance alone is not a reason to incorporate. The decision turns on profit level, drawings pattern, capital needs, and a dozen other factors. We discuss the trade-offs with sole traders sitting at £80,000+ of net profit, because the tax savings often justify the change. We do not push the conversation if the numbers do not support it.

My company is below the VAT threshold. Do I need MTD software? Not for MTD VAT. Some companies still benefit from voluntary VAT registration; that is a separate conversation. For corporation tax filings, the existing CT600 process is unchanged for now.

Can I keep using a spreadsheet for company bookkeeping? Yes, technically, but most limited companies above hobby scale benefit from cloud accounting for management reporting, payroll integration and audit-readiness. The MTD VAT requirement makes pure-spreadsheet workflows harder to keep compliant.

Talk to us about your company position

We work with limited companies across Northern Ireland on corporation tax, VAT, and the MTD compliance that already applies. If you are unsure whether MTD affects your company, the first conversation is free.